Shell takes FIDs for Niger Delta projects after pipeline explosion

Shell Petroleum Development Co. of Nigeria Ltd. (SPDC), operator of the Nigerian National Petroleum Corp. (NNPC)/SPDC joint venture (SPDC JV), reported that the group has taken final investment decisions for the Trans Niger Pipeline loop-line (TNPL) and the Gbaran-Ubie Phase Two projects. Both are in Nigeria’s eastern Niger Delta.

Total capital investment of the two bundles of projects is $3.9 billion, SPDC said.

Trans Niger Pipeline (TNP) carries 180,000 b/d of crude oil to the Bonny Export Terminal and is part of the gas liquids evacuation infrastructure, “critical for continued domestic power generation (Afam VI power plant) and LNG exports,” SPDC said.

Explosion, fire at theft point

On June 19, SPDC JV had shut the TNP system following an explosion and fire at a crude theft point on the 28-in. section of the facility at Bodo West in Ogoniland.

Before the incident, SPDC had shut down the 28-in. TNP to remove crude theft connections. It then closed the 24-in. TNP as a precautionary response to the fire, effectively shutting in the entire TNP system and deferring some 150,000 b/d of oil.

“This is another sad reminder of the tragic consequences of crude oil theft,” said Mutiu Sunmonu, SPDC managing director and country chair, Shell Cos. in Nigeria. “Unknown persons continued to reconnect illegal bunkering hoses at Bodo West even as our pipeline team were removing crude theft points. It was therefore not surprising that the fire occurred from the continuing illegal bunkering even as a previous crude oil theft point was being repaired by the team,” he said.

Shell said the 24-in. TNP will be reopened when it is safe to do so, while the 28-in. TNP will remain shut-in until the fire has been extinguished and investigation and damage assessment completed.

Sunmonu said that so far there was practically no spill from this event as the oil is burning off. “What is visible in the water is from an earlier oil spill which was also as a result of oil theft,” he said.

“The explosion also triggered a fire on a nearby barge,” Sunmonu said, adding, “Crude theft continues to pose significant challenges to the people, environment and the local and national economy, and all stakeholders must work together to stop this criminal activity.”

TNPL design, Gbaran-Ubie Phase Two

The design of the TNPL, the system’s loop-line, will include improvements that make the line better protected against theft and sabotage, SPDC reported. Total capital investment for the TNPL project bundle is estimated at $1.5 billion and is proposed to be executed by three indigenous contractors “who have grown steadily over the past 5 years from medium-sized companies to big players in the industry,” SPDC said.

The Gbaran-Ubie Phase Two project, meanwhile, consists of five gas supply and infrastructure projects that are critical for the continued gas supply to the Nigeria Liquefied Natural Gas plant and the Gbaran-Ubie domestic power plant. Total investment for the Gbaran-Ubie Phase Two bundle is $2.4 billion and the project's construction includes local and international companies. The expected peak production from these projects is 215,000 boe/d.

Sunmonu said, “These investments will help to secure energy supplies for domestic and international markets. The TNPL project demonstrates the tangible steps SPDC and its partners are taking to tackle the scourge of criminal activity—pipeline sabotage and crude theft in the Niger Delta, which is the cause of so much environmental and economic damage in this region.”

‘Strategic review’ initiated

Separately, Shell’s wholly owned unit SPDC reported the initiation of what it is calling a “strategic review” of the interests that it holds in selected onshore leases in the SPDC JV. SPDC JV partners are NNPC 55%, SPDC 30%, Total E&P Nigeria Ltd. 10%, and Nigerian Agip Oil Co. Ltd. 5%.

As part of the review, SPDC will initiate a “consultation with partners, and the potential exit from the interests it holds in some further onshore leases in the eastern part of the Niger Delta, subject to partner and regulatory approvals.”

The SPDC JV produced 750,000 boe/d in 2012 from 28 oil-mining licenses (OMLs) across the Niger Delta, both onshore and in the near offshore. “SPDC has been following a strategy of selective divestments of its onshore portfolio, concentrating the operating footprint into a smaller, more contiguous area, while supporting the government’s policy of encouraging investment by indigenous companies in the Nigerian oil and gas industry,” the company said.

Since 2010, SPDC has sold its interest in eight OMLs for a total of $1.8 billion.

Sunmonu further commented, “Nigeria remains an important part of Shell’s portfolio, with clear growth potential, particularly in deepwater and onshore gas. This strategic review marks another step in refocusing the SPDC portfolio.”